Sales catching fire
at Detection Systems

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Detection Systems Inc. is fanning a fire, one that analysts think could explode sales at the maker of fire-protection and security devices.
Exports are hot at Detection Systems, which holds its annual meeting next Thursday. The firm’s international division–guided by an industry maverick who recently jumped from a rival firm to join Detection Systems–is pumping up sales at a quick clip, offsetting a slowdown in the domestic arena.
Detection Systems makes a range of equipment for the fire-detection and security industries, including electronic fire detectors, alarm-control equipment, intrusion sensors, personal-safety systems for college campuses and audio-discrimination sensors.
Despite losing business from ADT Security Systems–a major customer that last year announced plans to cut back orders with the firm–sales for the first quarter of fiscal 1996 ended June 30 rose 7 percent to $8.8 million. In the past, ADT represented roughly 15 percent of total sales for Detection Systems.
Lawrence Burrows, a principal at Brighton Securities Corp., suspects international sales are picking up the slack left by ADT.
As indeed they are. Exports, which accounted for 6 percent of total sales in fiscal 1995 ended March 31, have more than doubled so far this year, said Lawrence Tracy, president of Detection Systems International Inc.
Detection Systems hired Tracy early this year to head its international push. Founder of competitor C&K Systems Inc., Tracy built that business to $104 million in annual revenues, nearly 70 percent from international sales.
When President Karl Kostusiak heard that Tracy had cut ties with C&K in January, “it took him 12 minutes to find my phone number,” Tracy quipped from his office in Auburn, Calif.
Detection Systems has opened offices in France, Australia, China and Hong Kong. Another office in the United Kingdom should be up and running by year’s end, Tracy said.
The company also has active distributors in 20 countries, up from just three at the start of 1995. Detection Systems already sees a payoff from signing on new distributors; Tracy reports the firm nabbed its first-ever order from Russia this week, a $52,000 deal.
Efforts to start an offshore manufacturing operation are well under way. The company has leased a 70,000-square-foot facility near Macao and expects to ramp up production by October, spending roughly $700,000 on equipment for the venture.
Kostusiak said Rochester employment will remain stable for the foreseeable future. Detection Systems employs 300 workers at its Fairport headquarters and manufacturing facility, down from 354 at the end of fiscal 1994.
Revenues bumped up 9.5 percent in fiscal 1995, climbing to $34.3 million from $31.4 million the previous year. Profits rose to $1.5 million, or 52 cents a share, up from $1.3 million, or 44 cents a share, in fiscal 1994.
First-quarter sales inched up from $8.2 million last year to $8.8 million this year, but income for the quarter tanked. Detection Systems earned $163,000, or 6 cents a share, for the quarter, down from $458,000, or 16 cents a share, during the same period in fiscal 1995.
Kostusiak said the dip in first-quarter profits reflected a full write-off of all international expenses.
Burrows of Brighton Securities estimates Detection Systems’ international push could add as much as $1.50 a share to the company’s bottom line, “even if nothing else happened.” The firm’s stock, which trades on the NASDAQ exchange, was trading midweek at $6.50 a share, up from a year-end close of $6.25.
The Security Escort–a wireless personal-safety system designed for college campuses that the firm introduced in 1993–is described in the 1995 annual report as “promising,” but has not struck gold yet.
“It’s a well-conceived product with, I think, a potential demand,” said Theodore Levy, vice president of research at Sage, Rutty & Co. Inc. “But the firm was unable to put together the right marketing team for it.”
Nor was it able to line up a partner with marketing clout to sell the product, although a window of opportunity remains to do that, Levy added.
Although his main task is to boost international sales, Tracy also plans to bring domestic customers on board by joining the firm’s marketing team. In fact, C&K–the company Tracy founded–is the firm that now claims ADT as a major customer.
Tracy said he will be working to bring that business back to Detection Systems.
Burrows thinks Detection Systems, with its strong fundamentals, is undervalued. At the end of fiscal 1995, the firm had net working capital of $15 million, including $7 million in cash. And long-term debt dropped from $1.1 million in 1994 to $746,000 last year.
Detection Systems’ annual meeting will be held at its Fairport headquarters, 130 Perinton Parkway, on Thursday, Aug. 3, at 1 p.m.